Dubai's enormous oil revenues mean that the government has no need to raise income through direct taxation. Accordingly Dubai is a "no tax" emirate characterized by an almost complete absence of taxation. There are no withholding or capital taxes.

Speaking in November 2005, the late Sheikh Mohammed bin Rashid Al Maktoum, then Crown Prince of Dubai and the Defence Minister of the United Arab Emirates sought to quash speculation regarding the possible introduction of an UAE sales tax.

It had been suggested in August of that year that the United Arab Emirates was mulling the introduction of a national sales tax, and reports suggested that the International Monetary Fund had been asked by the UAE authorities to help develop a value added tax system in an attempt to widen the country's tax base.

The IMF also reportedly urged the UAE to introduce a property tax and widen the corporate tax net across all sectors, warning that state budget surpluses, which have been dependent on high oil prices in recent times, are unsustainable without longer-term sources of tax revenues.

The reports were seemingly confirmed when Sheikh Hamdan bin Rashid Al Maktoum, then-Deputy Ruler (now Ruler) of Dubai and UAE Minister of Finance and Industry stated that: “We are (still) under discussion (and) we have not decided yet. They are just bringing the idea (of levying tax).”

Moreover, the revelation by Shaikha Lubna Al Qasimi, the UAE's Minister of Economy and Planning that the government was studying a plan to introduce sales tax on tobacco and alcohol from 2006 fuelled the speculation still further, with many observers interpreting the decision as a first step towards more general forms of taxation.

However, the former Dubai ruler's words were taken to suggest that the emirate will at least remain free from income taxes for non-oil firms and individuals for the foreseeable future.

The introduction of a value added tax system in the United Arab Emirates (UAE) looks set to go ahead but later than planned. The UAE has been studying the possible introduction of VAT for some time, and a recent report by Dubai Customs suggested that the levy could be introduced as early as 2009. However, it is becoming more apparent that the GCC member states want to roll out VAT simultaneously to replace revenues derived from trade taxes, which are due to be phased out as a number of free trade agreements signed by the GCC, including one with the EU, become effective. It is thought that this won't happen until 2012 at the earliest.

With the exception of banks and oil companies no corporate income tax is payable by businesses in Dubai. Oil companies pay up to 55% tax on UAE sourced taxable income whereas banks pay 20% tax on taxable income. The taxable income of banks is as per the audited financial statements whereas that of oil companies is as per the concession agreement. Oil companies also pay royalties on production.

Dubai Customs Duties

Imports into Dubai can only be undertaken by those importers who have the appropriate trade licence. Import duties have been largely standardised at 4%, but there are many exemptions, including food, building materials, medical products and any item destined for the three free zones: Jebel Ali Free Zone, Dubai Internet City, and the Dubai International Financial Centre. Food products must carry dates of manufacture and expiry and meat for the local market must have a certificate to prove compliance with Islamic law.

Dubai (as part of the UAE) and under an agreement with the GCC (Gulf Cooperation Council) is required to levy 10% duty on all luxury goods.

By law 70 goods have been exempted from tariffs (at the time of writing), including medicines, agricultural machinery, pesticides, fertilizers, periodicals, wood, unstrung pearls, un-worked silver and gold, iron and steel for use in construction, and raw or partially worked materials for use by local manufacturers. Goods produced within the GCC are also exempt from duties as are goods destined for the Jebel Ali Free Zone.

Cigarettes are the exception to the general rule with the federal government approving a 100% tax. A 50% tax is levied on alcohol.

On January 1, 2003, the unified customs area of the Gulf Co-operation Council came into effect, covering Kuwait, Qatar, Oman, Saudi Arabia, Bahrain, and the United Arab Emirates (including Dubai).

In April 2005, the 15th Joint Council and Ministerial Meeting between the European Union and the six member states of the Gulf Cooperation Council in Bahrain took place, focusing on the state of the free trade agreement negotiations between the European Union and the Gulf Cooperation Council.

The two parties agreed that rapid progress was needed on a number of outstanding trade issues, particularly on services, industrial tariffs and public procurement, and noted the importance of a rapid conclusion of the negotiations on human rights, terrorism, weapons of mass destruction and migration issues.

A further round of talks on the matter took place in June 2005. The talks dragged on into 2009 without agreement.

An appeals desk has been established at the federal customs directorate to hear claims from customs importers for goods to be classified as duty free. The Dubai port authority offers long-term storage at concessionary rates. Temporary imports are allowed with duty payable only on goods which remain in the UAE after 6 months.

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Dubai Business Properties Tax

Business properties pay a municipal tax set at 10% (2008) of annual rental value.